Turning a gilded age into a golden age

To me a gilded age is based on unsustainable growth, growth caused by the creation of new markets, which collapses once the market matures. However for a lucky few it is possible to turn a gilded age into a golden one; it’s just not easy since it takes something that is difficult to come by, disciplined and innovative leadership.

In the previous post I mentioned Google. Google has emerged from the gilded internet age of the 90’s into a potential golden age by finding new areas to grow in, all the while remaining focused on its core competencies information management and advertisements. To some it might seem that Google might want to take on Dell, and control the computer market, but making computers isn’t one of Google’s core competencies, and win or lose Google might shrink its market, so it is highly unlikely you will be buying a Google PC anytime soon. Someday soon businesses might be running Google DB instead of MS-SQL, since entering that market space makes more sense for Google. This would work best if Google DB had an advantage besides a lower price. Like table management and compression based on Google’s proprietary algorithms, which gave it enterprise (Oracle/DB2) performance at small business prices or something like that.

In order to open up an existing market to rapid expansion again is later generation products must open up a new market segment or be revolutionary. An the example of a green technology company making this switch, would be a company that makes CO2 scrubbers for power plants, could start making low cost CO2 scrubbers for gas or oil home furnaces as a way to enter a new market segment. Or they could gain market share in their existing market by making a new CO2 scrubber for power plants that turned the CO2 and fly ash into super hard paving material or entrains the neutralized flue gas into cement as a hardening and anti-corrosion agent (don’t laugh both are technically possible.) This leap in technology that can turn waste from a liability to an asset, would make it worth ripping out even a not that old CO2 scrubber and putting in a new one, giving the company a boast in sales and a bigger piece of the market.

Speaking of companies that might be heading for a golden age the new Kinko’s, FedEx, Adobe relationship looks very promising. Its like Steve Job’s said of the new iPod, if anyone is going to steal Apple’s market share it’s going to be Apple. This partnership allows you to collaborate on a document with colleagues world wide, then print it to any Kinko’s you want (there are Kinko’s locations in ten countries.) So, now you hit print in LA, and an hour later a Kinko’s van pulls up outside the London and Sydney branches of your company and drops off the new marketing materials. Think of the savings in money and time versus shipping all the materials from LA. Sure this hurts FedEx, but FedEx owns Kinko’s so they make money on the deal. However, this arrangement also takes business from UPS, DHL, and the USPS, and puts the money in FedEx’s pocket. Plus, FedEx has another trick up its sleeve; let’s say that your sales guy is in Munich and there are no Kinko’s in Munich, but you need him to have so brochures by tomorrow. Well FedEx overnight to Europe isn’t cheap and with customs your guy might not have the stuff for a week. So you can hit print in LA, the stuff prints in Amsterdam and get stuffed into a FedEx mailer and since both countries are in the EU, your guy has it next day and it since only data crossed the pond it cost you less. Pretty neat trick, if it works. Logistics people are likely drooling at the just in time possiblities of reduced inventory and shipping costs.

The key to this kind of growth is never move too far from what you know.

GE is the premier example of this kind of growth, and in many ways the exception. GE buys good companies (#3 or 4 in the field) then specializes in making them #1 or 2 and then keeping them there. GE’s core competence is in continuous growth, since it does everything from light bulbs, to wind turbines, enzymes to MRI, and not to mention money, GE’s credit and finance arm really is the key to GE’s power. GE succeeds by leveraging the core competence of the companies it buys to understand the markets it enters, then uses its might to grow company. This makes GE very diversified without the loss of focus that normally comes with diversity. Now there are many who aren't pleased with the rate of GE's recent growth, but as long as they are still growing in the long run they are a good bet.

So, as your little start up grows into a market giant and the changes that happen when little companies become big companies dull your innovative spirit, always remember the rough and tumble early days. Don't become complacent assuming you can make evolutionary changes forever. Never forget Polaroid, photograph giant one day, nearly gone the next, once digital photograph came on the scene.